March Madness bad for business?

March Madness bad for business?

Today starts the peak season for college basketball by way of the NCAA men’s tournament, also known as March Madness.

But does that mean a drop in worker productivity tied to trash talking at the office water cooler, or a major boost to business as people pick up more Siena T-shirts in time for Friday’s game against Purdue? Economists and number crunchers are mixed on the question.

Global outplacement consulting firm Challenger, Gray and Christmas estimates the cost of this year’s NCAA Tournament in lost worker productivity to be $1.8 billion, based on 20 minutes a day of wasted work time among the 58.3 million people estimated to take part in office pools. Such tournament enthusiasts are expected to be busy this week until the end of the first round Friday, the day Challenger says March Madness-related activity will peak as “people research teams, put together their brackets and watch games online during work hours.”

“Keep in mind that it is nearly impossible to gauge the impact of March Madness on productivity in an information-based economy where workers possess portable technology that allows them to work from anywhere and any time. This estimate is probably about as accurate as the point spreads computed by Las Vegas bookmakers,” wrote John Challenger, chief executive officer of the firm, in its report. “As the tournament moves

beyond the first and second round, the impact on the employer decreases, since few games are played during office hours and workers can no longer make adjustments to their brackets, thus eliminating the need to research teams.

“Those who insist there will be no impact are kidding themselves. It might be a slight drop in output or it could be slow Internet connections as bandwidth is sapped by employees watching streaming feeds of the games,” Challenger added.

University at Albany School of Business Dean Donald Siegel said there is mostly a goodwill effect by the tournament.

“The net impact is positive because the direct economic impact is so large because of the impact on hotels and restaurants and all the economic activity that arises from people traveling to the region to attend the events. It’s a joyous time for those who are coming to the arena. They celebrate; they spend more money than they normally do. It’s a once in a lifetime opportunity for some people,” Siegel said.

Siegel said the tournament can give a major boost to universities and colleges, as those who make it through the first round experience a spike in the enrollment pool and alumni donor activity the following year.

“This fundraising side of it for universities is very important as their revenue declines [because of state budget cuts],” Siegel said. “There’s a lot of revenue at stake here, it’s not just for the businesses, but it’s for the schools. Everybody wants to support a winner and the students are crazy about the teams. It does affect the rate at which they give back to the university.”

Siegel remembers the frenzy caused when UAlbany made it to the NCAA Tournament in 2006 and 2007. Universities get a double payback — licensing income from merchandising as people buy more jerseys and a boost in donors, he said.

Sports economist Andrew Zimbalist was more conservative with his view on the tournament’s impact. For decades, Zimbalist has been a prolific author and essayist on the business of sports, and has written several books on sports issues, most recently “Circling the Bases: Essays on the Challenges and Prospects of the Sports Industry,” which will be published by Temple University Press in September.

He is the Robert A. Woods professor of economics at Smith College in Northampton, Mass.

“If you are talking about the economic impact on a local area, it is quite small and depends on a number of factors. If you are talking about an impact on the U.S. economy, it is between zero and a very small negative effect,” Zimbalist said in an e-mail. “There is no definite scholarship on this issue. Some argue that it will lower productivity, but, if so, then one could make similar arguments for all mega sporting events, for political campaigns, good guests on the Letterman show, etcetera.”

For human resource professionals, the rules are set in stone by way of manuals and other workplace policies — like don’t gamble at work with bracket pools. Taking a break at your cubicle to watch the game online might not be a good idea either, according to Jay Canetto, director of human resources at the New York State Office of the Comptroller, which employs 2,600 workers.

“I have a general rule, don’t do anything that gets in the way of your or others’ work productivity,” said Canetto, a member of the Capital Region Human Resource Association in Albany.

The office is supportive of other types of community-building, within limits, he added.

“I go to the Siena games. A lot of us go to the Siena games. A lot of Siena grads [work] here. People can take time off and watch the games. But in terms of the actual workplace, we don’t want to see that happening,” Canetto said.

Employees may have spring fever, and all of that pent up energy from being cooped up all winter may end up being released during March, Canetto said. But in a government setting, there’s less acceptance of that.

“We’re a public entity. We serve the taxpayers. It would be frowned upon,” Canetto said. “For a private company or a person who runs their own business, they have more liberties. The Comptroller’s Office is a serious organization. We’re here to do a job and it’s important.”

Most employees know to enjoy March Madness off the clock, he said. “I don’t see it as an issue for the workplace,” Canetto said.

In a time of workplace anxiety about layoffs and economic concerns, a bit of distraction can be helpful, Challenger said in its report. “This could mean putting televisions in the break room, so employees have somewhere to watch the games other than the Internet. Employers might consider organizing a companywide pool, which should have no entry fee in order to avoid ethical and/or legal questions,” the firm said.

Siegel said the impact on local businesses overall isn’t anything to worry about.

“Half of the teams lose in the first round. I don’t think that’s a big issue. There is a positive aspect to it. On the bright side. It’s something that people can share. It’s a collective good,” Siegel said.

“There is some teasing that goes on. You have rivalries. But because the duration of the event is so small and the probability that a team is going to make it to the next few rounds is so small, it’s not going to have a major effect on a company. That’s not something that businesses should be concerned about.

“Yes, people are distracted while the game is going on but there is a certain sense of camaraderie when you have a pool at work. It’s like a team-building aspect, which counteracts the fact that people are spending time watching the game or are distracted from other pursuits.”